Usha Ispat Ltd. (USHAISPAT) - Auditors Report

Company auditors report

USHA ISPAT LIMITED
ANNUAL REPORT 2004-2005
AUDITORS' REPORT
In the member of Usha Ispat Limited
1. We have audited the attached Balance Sheet of Usha Ispat Limited as it
31st March, 2005 and also the Profit and Loss Account and the Cash Flow
Statement for the year ended on that date annexed thereto in which accounts
of the branches are incorporated. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on out audit.
2. We conducted our audit in accordance with auditing standards generally
accepted in India. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statement;
are free of material misstatement. An audit includes examining, on a test
basis. evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as swell as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
3. As required by the Companies (Auditors' Report) Order, 2003, issued by
the Central Government in terms of Section 227(4A) of the Act and as per
Companies (Auditors' Report) (Amendment) Order, 2004 and on the basis of
such checks as we considered appropriate, and according to the information
and explanations given to us. we give in the Annexure a statement on the
matters specified in paragraphs 4 and 5 of the said Order to the extent
applicable to the Company.
4. Further to our comments in the Annexure referred to in paragraph (3)
above, we report that:
a) we have obtained all the information and explanations which to the best
of our knowledge and belief were necessary for the purposes of our audit:
b) In our opinion, proper books of account as required by law have been
kept by the Company so far as appears from our examination of those books
and proper returns adequate for the purposes of our audit have been
received from the branches not visited by us;
c) The Balance Sheet the Profit and Loss Account and the Cash flow
statement dealt with by this report are in agreement with the books or
account in which the accounts of the branches are incorporated.
ii) In our opinion the Balance Sheet Profit and Loss Account and the Cash
Flow Statement dealt with by this report comply with the mandatory
Accounting Standards referred to in Section 211(3C) of the Companies Act.
1956, except in the case of Accounting Standard 28 art 'Impairment of
Assets'.
e) On the basis of written representation received from the directors and
taken on the record by the Board of directors, we report that all the
directors are disqualified as on 31st March 2005, front being appointed as
directors of the company in terms of section 174(1) (g) of the companies
Act, 1956, as the company has failed to redeem its debentures on due
dates and as failure continues for more than one year,
f) We draw attention to Note No. 13 of Schedule 'T' on Notes to the
accounts for preparing financial statements on a going concern bases. The
Company has incurred at net loss of Rs. 581515. Thousand during the year
ended 31st March, 2005 and as of date the Company's current liabilities
exceed 31st current assets by Rs.4972303. Thousands and its total
liabilities exceed its total assets by Rs. 10597626 Thousands. These
factors alongwith other matter as set forth in above-said note no. 13 raise
doubt that the Company will he able to continue is a going concern.
g) (i) Non Provision of interest on secured loans/ Debentures and unsecured
loans from Financial Institutions for the year amounting to Rs.3143037
thousands on abondoned / Suspended projects of integrated steel plant-
Satarda, Sinter Plant Redi and Raw Material handling system Redi and as of
Balance Sheet slate accumulated interest of Rs.6311036 thousands resulting
into understatement of losses by Rs 3243037 thousands, secured loans by
Rs.5517748 Thousands, unsecured Loans by Rs.46803 Thousands and Current
Liabilities by Rs.746485 Thousands.
(ii) Non confirmation and non reconciliation of Secured Loans / Debentures
including interest accrued and due there on from financial institutions and
banks and shortfall in security cover amount not determined as on the
Balance Sheet date, as such, the impact on the financial statements, if any
could not be ascertained.
(iii) Non confirmation and non reconciliation of party's Debet and Credit
balances and their consequential effect on accounts if any.
(iv) Non provision of losses and impairment of Assets arising out of
abandonment / suspension / impairment of incomplete projects in the earlier
year (a) Rs.6046072 thousands for abandoned projects of Integrated Steel
Plant Saturda, Sinter Plant redi and Rs.257664 thousands for suspended
project of Raw material Handling System - Redi aggregating to Rs.6303736
thousands under Capital, Work in Progress (including advances of Rs.160362
Thousand) and (b) Net block of fixed assets of Rs.41499 thousands of
Integrated Steel Plant, Satarda on account of the difference between the
net recoverable value and net book value of these assets, resulting into
under statement of losses and over statement of fixed assets and capital
work in progress - amount not determinable for want of information of their
net realisable value as further explained in Notes to the Accounts.
(v) Impairment loss arising out of impairment of assets has not been
recognised in the financial statement for abandoned / suspended project as
stated above and for other assets. The amount is not determined for want of
information with respect to the indication of impairment of assets and the
estimated recoverable amount. Therefore we are unable to comment on the
impact of the same on the financial statement.
Without considering items mentioned in paragraph 4(g)(ii) to (g)(v)
hereinabove, the effect of which could not be determined, we further report
that had the observations made by us in paragraph 4(g)(i) hereinabove been
incorporated, the loss for the year would have been Rs.3824552 thousands
(as against the reported loss figure of Rs.581515 thousands) and Current
Liabilities would have been Rs.6498451 thousand (as against reported figure
of Rs.216866 thousands) and secured loan would have been Rs.18614590
Thousand (as against reported figure of Rs.13096842 Thousands, in our
opinion and to the best of our information and according to explanations
given to us, the said accounts give the information required by the
Companies Act, 1956 in the manner so required and because of the effects of
the matters discussed in the preceding paragraphs, the financial statements
do not give a true and fair view in conformity with accounting principles
generally accepted in India.
In the case of Balance Sheet, of the sate of affairs of the company as at
31st March, 2005;
In the case of Profit and Loss Account, of the loss of the company for the
year ended on that date; and
In the Cash Flow statement, of the cash flows of the company for the year
ended on that date.
For Bansal & Co.
Chartered Accountants
S.D.Bansal
Partner
Membership No. : 14301
Place : New Delhi
Date : 25th June 2005
Annexure to Auditors' Report:
(Referred to in Paragraph 3 of our Report to the Members of Usha Ispat
Limited on the accounts for the year ended March 31, 2005)
1) a. The company has not maintained proper records showing full
particulars including quantitative details and situation of the fixed assets
in respect of, except of Redi Division.
b. The fixed assets have been physically verified by the management except
fixed assets and fixed asset not capitalised represents under capital work
in progress of the abandoned and suspended projects, as such; discrepancy
between book record and physical verification could not be ascertained.
c. During the year the company has not disposed off substantial part of the
fixed assets and as such do not effect the going concern. However, because of
other factors as stated in paragraph 4(f) of our report, it effects the
going concern status.
2) a. The physical verification of inventory except inventory of dross slag
at Redi Plant has been conducted by the management during the year which in
our opinion is reasonable having regard to the nature of the inventory.
b. The procedures of the physical verification of the inventory followed by
the management are reasonable and adequate in relation to the size of the
company and nature of its business.
c. According to the information and explanations given to us, the company
has maintained proper record of the inventory and no material discrepancies
were noticed on physical verification of inventory as compared to book
records other than the discrepancy c inventory of dross slay, if any, due
to non physical verification.
3) The company has, during the year, neither granted nor taken any loans,
secured or unsecured to/from companies, firms or other parties listed in
the register maintained under section 301 of the Companies Act 1956.
Therefore, sub clause (a), (b), (c), (d). (e), (f) and (g) of clause 4(iii)
of the order are not applicable.
4) In our opinion and according to the information and explanations given
to us, there are adequate internal control procedures commensurate with the
size of the company and nature of business for the purchase of inventory
and fixed assets and for sale of goods.
5) According to the information and explanations given to us and on the
basis of our examinations of the books of account of the company there is
no contract or arrangement referred to in section 301of the Companies Act,
therefore, clause 4(v)(a) and (b) are not applicable.
6) In our opinion and according to information and explanations given to
us, the company has complied with the provision of section 58A 58AA or any
other relevant provisions of the Act and the companies (acceptance and
deposits) Rules, 1975 with regard to the deposits accepted from the Public.
7) In our opinion and according to the explanations given to us the company
has an internal audit system commensurate with size and nature of its
business.
8) Maintenance of cost records has not been prescribed by the central
government under clause (d) of sub section (1) of section 209 of the
Companies Act, 1956.
9) a. According to information and explanations given to us and as per
records produced before us for verification, the company is regular in
depositing statutory dues including Investor Education and Protection Fund,
E.S.I. Income tax, Sales Tax, wealth tax, service tax, Custom duty, Excise
Duty, Cess and any other statutory dues as applicable with the appropriate
authorities except Provident fund, and tax deducted at source. As per
information and explanations given to us, no undisputed statutory dues are
outstanding as at 31.03.05, for a period exceeding six months from the date
they became payable except statutory dues of Custom Duty aggregating to Rs
248457 Thousand outstanding for more than six months which are as follows:
STATEMENT OF UNDISPUTED STATUTORY DUES OUT STANDING FOR MORE THAN SIX
MONTHS AS ON 31-03-2005
NATURE OF NATURE OF DUES AMOUNT (RS.) PERIOD DUE DATE
STATUE IN THOUSANDS)
CUSTOM ACT CUSTOM DUTY 3744 97-98 24.10.1997
24012 97-98 15.03.1998
27046 98-99 04.06.1998
20498 98-99 04 06.1998
22011 98-99 29.08.1998
5605 99-00 02.01.2000
1737 00-01 26.09.2000
TOTAL - A 104654
CUSTOM ACT INTEREST ON TILL
CUSTOM DUTY 143803 30.09.04
TOTAL - B 143803
GRAND TOTAL 248457
b. As per information and explanations furnished to us and on verification
of records produced. there are disputed statutory do outstanding
aggregating to Rs342801 Thousand as at 31st March, 2005, which have not
been deposited with the respect6 authorities in respect of Income Tax,
Sales Tax, Custom Duty and Excise Duty which are as follows:
NAME OF NATURE OF AMOUNT PERIOD TO FORUM WHERE
STATUTE THE DUES (RS. IN WHICH THE DISPUTE IS
THOUSANDS) AMOUNT PENDING
RELATES
CENTRAL Excise Duty 5709 1994-95 HIGHCOURT MUMBAI
EXCISE ACT 2426 1995-96
Excise Duty 105 1994-95 CEGAT MUMBAI
Excise Duty 6918 2001-2002 CEGAT MUMBAI
Excise Duty 120 1998-99 ASSISTANT
COMMISSIONER EXCISE
RATNAGIRI
Excise Duty 18 2000-2001 COMMISSIONER
(APPEAL) PUNE
Excise Duty 50 1999-20 CEGAT MUMBAI
Excise Duty 1500 2000-01,
2001-02 CEGAT MUMBAI
Total-A 16846
Custom Act Custom Duty 1189 1998-99 CEGAT MUMBAI
Total-B 1189
11175 94-95 MAHARASHTRA SALES
76158 95-96 TAX TRIBUNAL, MUMBAI
Central Sales Tax 104890 96-97
Sales Tax Act 40114 97-98
7865 99-2000
116 98-99
Bombay Sales Tax 37539 95-96
Sales Tax 26456 96-97
Act 17725 97-98
1389 99-2000
TOTAL C 323428 -
Income Tax Income Tax 1338 1993-94 ITAT Delhi
Act TOTAL D 1338
GRAND TOTAL
(A+B+C+D) 342801
10) The company has accumulated losses of more than fifty percent of Its
net worth as at the end of the financial year 31st March, 2005. The Company
has incurred cash losses during the financial year ended on that date and
in the immediate preceding financial year.
11) The company has defaulted In repayment of dues to financial
institutions, banks and debenture holders as at 31st March, 2005. The
period and amount of default are given as follows:
DEFAULT OF REPAYMENTS OF LOANS TO FINANCIAL INSTITUTIONS, BANKS AND
DEBENTURE HOLDERS:
AMOUNT OF DEFAULT PERIOD OF DEFAULT AMOUNT OF PERIOD OF DEFAULT
PRINCIPAL FROM THE DUE DATE DEFAULT FROM THE DUE DATE
TO 31-03-2005 PRINCIPAL TO 31-03-2005
87500 21-09-99 8650 30-09-99
87500 21-09-00 8650 31-12-99
36250 28-06-01 8650 31-03-00
3750 03-08-01 8650 30-06-00
47500 21-09-01 8650 30-09-00
340000 26-09-99 6450 31-12-00
340000 26-09-00 4286 14-04-99
499327 30-09-99 4286 14-07-99
83333 01-10-99 4286 14-10-99
83333 01-10-00 4286 14-01-00
83333 01-10-01 4286 14-04-00
83333 01-10-02 4286 14-07-00
83333 01-10-03 4286 14-10-00
83334 01-10-04 4286 14-01-01
4043 01-04-03 4278 14-04-01
4043 01-07-03 9375 14-04-99
4043 01-10-83 9375 14-07-99
4043 01-01-04 9375 14-10-99
4043 01-04-04 9375 14-01-00
4043 01-07-04 9375 14-04-00
4043 01-10-04 9375 14-07-00
4043 01-01-05 9375 14-10-00
9000 12-04-99 9375 14-01-01
15000 12-04-00 9375 14-04-01
15000 12-04-01 9375 14-07-01
12000 28-06-01 9375 14.10-01
9000 12-04-02 9375 14-01-02
9000 12-04-03 9375 22-01-02
21945 01-10-99 6813 01-07-04
21945 01-01-00 6813 01-10-04
21945 01-04-00 6813 01-01-05
21945 01-07-00 2880441 01-06-01
21945 01-10-00 1039599 28-06-01
21946 01-01-01 1905638 22-01-02
21946 01-04-01 937307 01-06-01
21946 01-07-01 12241 01-01-02
90800 03-08-01 7929 25-01-02
16271 01-10-01 2781 03-01-05
16271 01-01-02 3000 28-02-05
16271 01-04-02 3000 31-03-05
16271 01-07-02
16271 01-10-02
62425 04-10-02
10596 01-01-03
10596 01-04-03
10596 01-07-03
10596 01-10-03
26483 13-10-03
6813 01-01-04
6813 01-04-04
TOTAL 9648622
DEFAULT OF REPAYMENTS OF LOANS TO FINANCIAL INSTITUTIONS, BANKS AND
DEBENTURE HOLDERS'
AMOUNT (RS. IN THOUSANDS)
AMOUNT OF DEFAULT-INTEREST` PERIOD OF DEFAULT FROM THE PERIOD
AS MENTIONED BELOW UP TO 31-03-05
276847 1998-99
482731 1999-00
1800638 2000-01
2254888 2001-02
2617836 2002-03
3268165 2003-04
3616155 2004-05
* It includes Rs. 6311036 thousands against which no provision has been
made in the books of account.
12) In our opinion and according to information and explanations given to
us, the company has not granted any loan or advance on the basis of
security by way of pledge of shares, debentures and other securities.
13) In our opinion, the company is not a chit fund or a nidhi or mutual
benefit fund or society, therefore, the provision of clause 4(xiii) of the
Order is not applicable to the company.
14) In our opinion, Company is not dealing or trading in shares,
securities, debentures and other investments, therefore provision of Clause
4(xiv) of the Order is not applicable to the company.
15) As per information and explanations given to us, the company has not
given any guarantee during the year for loans taken by others from banks or
financial institutions.
16) As per the information and explanations given to us and on the basis of
review, the company has not taken any term loan during the year.
17) Based on the information and explanation given to us and on an overall
examination of the balance Sheet of the company, in our opinion there are
no funds raised on long term basis during the year and the funds raised by
short term basis have not been used for long term investment.
18) The company has not made any preferential allotment of shares to
parties covered under section 301 of the Companies Act, 1956 during the
year.
19) The company has created necessary securities as per the debenture trust
deed in respect of debenture issued any outstanding as on 31.3.2005 except
in case given herein below:
Name of the Institution Period Amount of loan
Unit Trust of India 2000-01 145543 Debentures
of Rs 1000/- each
amounting to
Rs 145543 thousands
20) The company has not raised the money by way of public issue during the
year hence clause 4(xx) of the order is not applicable to the company.
21) Based upon the audit procedures performed and information and
explanations given by the management, we report that no fraud on or by the
company has been noticed or reported during the year ended March 31, 2005.
For Bansal & Co.
Chartered Accountants
S.K.Bansal
Place : New Delhi Partner
Date : 25th June, 2005 Membership No: 14301